To know the entire process of cash creation today, why don’t we produce a hypothetical system of banking institutions. We shall concentrate on three banks in this system: Acme Bank, Bellville Bank, and Clarkston Bank. Assume that every banking institutions have to hold reserves add up to 10% of these deposits that are checkable. The amount of reserves banking institutions have to hold is named needed reserves. The book requirement is expressed as being a needed book ratio; it specifies the ratio of reserves to checkable deposits a bank must keep. Banks may hold reserves more than the needed level; such reserves are known as extra reserves. Extra reserves plus needed reserves total that is equal.